Which equity styles are performing well? The answer may surprise you
Your views on which stocks are performing well internationally are probably wrong – how might you respond?
Most people think of the current bull market as a “Growth” stock rally, backed by the US Magnificent-7. But that is only true in the US. The opposite is true internationally, where performance, sector make-up, and valuations are very different. The “Value” style has been flying.
This may come as a surprise because, when you look at the performance of global markets, what you are really looking at is the performance of the US, given its 75% weight. What happens in the other 25% barely registers.
Incorrectly extrapolating US performance to the rest of the world means opportunities are likely to have been missed. However, there are concrete actions you can take today to respond and position for the future.
Please see the end of this article for brief descriptions of the different equity styles discussed.
Turning the performance tables
In EAFE (Europe, Australasia, and the Far East, a stock market index designed to represent global developed markets excluding North America), Value returned 20% in USD terms in the 12 months to 31 August 2025, outperforming the market by 6% and “Growth” stocks by 13%. Growth stocks themselves lagged the market by 6%.
This is the reverse of the US experience that we read about all the time. Stateside, Value has underperformed Growth by 17% and the market by 8% in the past year.
The scale of these recent performance swings in EAFE are so great that they now also feed into more medium-term numbers. Over three- and five-year horizons, Value is well ahead of Growth and the market. European and UK Value stocks (MSCI EMU Value and MSCI UK Value) are not only ahead of their Growth equivalents; they’re also ahead of the S&P 500 over the past five years (in both common currency and local currency terms).
A regular, heavily US-influenced, question is, “what would it take for Value stocks to outperform again?” Outside of the US it has already happened!
Another segment that has struggled in the US but performed much better outside is High Dividend stocks. Past performance might not be a guide to the future, but things are clearly different outside the US.
One area of commonality has been the recent terrible performance of “Quality” stocks (those with more stable operating performance, better return on equity, lower leverage, etc.). These have outperformed over the long run in both the US and EAFE but have had a torrid 12 months. Quality has underperformed the market by 12% in EAFE and 7% in the US. In EAFE, this has been so punitive that Quality is also now well behind on a three- and five-year basis.
Click here to read more...
